Women needed opportunity, not charity They want Chance, not bleeding hearts Prof.

f. Mohammed Yunns Introduction Micro-finance is considered world wide as an important financial tool to help alleviate poverty and meet the needs of economically vulnerable people Poor people are not able to access loans from commercial banks normally because of lack in guarantee and collateral. But there are many other reasons also involved for which commercial banks were not willing to finance poor. These reasons are included that poor have less education, no proper experience and training, high expenses on transactions of small loans and lower rate of profit. Therefore limited option to access loan leads to push poor people in more poverty. This situation resulted in emerging the idea of micro lending and microfinance. Microfinance, therefore, a way to finance people, those have no collateral or any property for guarantee. Microfinance is a way of financing to poor for their business, to alleviate their poverty, empowering them, giving social benefits on sustainable way. According to Agion & Morduch (2005, pp.3), due to microfinance, there are many possibilities have emerged including extending markets, reducing poverty and fostering social change. But there is wide spread confusion that microfinance is just lending loan to poor but as we mentioned that microfinance is no more only loans but covering the issues of poverty alleviation, putting social impact on poor and educating poor to savings. Therefore, MFIs, today, not only NGOs but serving as a complete banking system. MFIs are providing many financial services including credit, savings, insurance credit cards, payment services etc. But almost all MFIs are lending credit by default. It is not necessary that every MFI should facilitate their customers by all these services but MFIs can facilitate anyone of these services or all. According to Ledgerwood (2000,pp.66) Though microfinance services have witnessed tremendous growth, still it is not able to reach out to all the segments of the poor section The critical challenge faced by the micro financial institution is high transaction cost which makes micro financing comparatively costlier. The reason behind this being high cost of supervision, small size and large number of loans. It is high time for MFIS to formulate new strategies to reduce the cost of financing. Microfinance organizations should provide livelihoods finance through its innovative strategy Before 1990's, credit schemes for rural women were almost negligible. The concept of women's credit was born on the insistence by women oriented studies that highlighted the discrimination and struggle of women in having access to credit. However, there is a perceptible gap in financing genuine credit needs of the poor especially women in the rural sector. There are certain misconceptions about the poor people that they need loan at subsidized rates of interest on soft terms, they lack education, skills, capacity to save, credit-worthiness and therefore are not bankable. Nevertheless, the experiences of

several SHGs(self-help groups) reveal that rural poor are actually efficient managers of credit and finance. Availability of timely and adequate credit is essential for them to undertake any economic activity rather than credit subsidy. The Government measures have attempted to help the poor by implementing different poverty alleviation programmes but with little success. Since most of them are target -based involving lengthy procedures for loan disbursements, high transaction costs, and lack of supervision and monitoring. Banks often suffer from poor repayment leading to a high level of non-performing assets NPAs(non-performing assets). Since the credit requirements of the rural poor can not be adopted on project lending approach as it is in the case of organized sector, there emerged the need for an informal credit supply through SHGS. The rural poor with the assistance from NGOs have demonstrated their potential for self-help to secure economic and financial strength. Various case studies show that there is a positive correlation between credit availability and women's empowerment. POVERTY IN INDIA AT A GLANCE Poverty is an acute problem in India The poverty line ($1.25 a day) as described by world bank report, in India the number of poor living in poverty line has increased from 421 million in 1981 to 456 million in 2005. According to Asian Development Bank (ADB), the new poverty line is roughly $ 1.35 per day. If this measure is used to measure poverty, nearly two-thirds of India's population or about 740 million are in poverty.In India, the reason for high rate of poverty ratio in rural area is due to predominate dependence of population on agriculture To achieve a higher rate of poverty reduction, India realized the importance of poverty reduction programme of micro financing to reach out the poorest people Micro-finance has became one of the most effective tools for economic empowerment of the poor women. Now the poor people are able to access financial services which previously were exclusively available to the upper and middle income population. In India banking system NABARD developed the Self Help Group [SHG] - bank linkage programme as the innovative strategy for increasing their reach out to the poor. According to the McKinsey India survey (April 2006) report, rural India has the potential to become a US$500 billion market by the year 2020. Meaning of Empowerment Empowerment is not essentially political alone; it is a process having personal, economic, social and political dimensions with personal empowerment being the core of the empowerment process. In fact political empowerment will not succeed in the absence of economic empowerment. The Scheme of Micro-financing through SHGs create empowerment promoting conditions for women to move from positions of marginalization within household decision making process and exclusion within community, to one of greater centrality, inclusion of voice. The Social processes of Micro financing programmes strengthens womens self esteem and self worth, instill a

greater sense of awareness of social and political issues leading to increased mobility and reduced traditional seclusion of women. Most importantly micro-finance programmes enable women to contribute to the household economy, increasing their intra-household bargaining power. Thus, micro financing through Self-help groups has transferred the real economic power in the hands of women and has considerably reduced their dependence on men. But the lack of education often comes in the way and many a times they had to seek help from their husbands or any other educated man/ woman for day-to-day work. The political as well as economic empowerment will not succeed in the absence of Women education in skills and vocations they require the most. The Governments in developing countries therefore must take effective steps to enroll the members of SHGs in the Schemes of open schooling or any other distance mode to impart education. Although it is also true that economic empowerment alone does not always lead to reversal in gender relationship Great strides have been made for women in India through political changes at the base of the pyramid, such as greater representation of women in elected local bodies as well rapid spread of the phenomena of self-help groups(SHG) who have been able to better their economic and social condition through access to micro finance .There is widespread evidence that SHGs have become the major vehicles of economic, social and political empowerment for women and the success of this mechanism, unique to India, has been widely noted in studies all over the world(satish,Aniket,2005,CGAP,2007) Self help group Self help group is an informal association of 12 to 20 small economically homogeneous affinity group of poor women .The SHG encourages small savings among its members. The savings are kept with a bank, obtain loans from bank and subsequently they decides which woman should get the loan at what rate of interest and also how much should be the repayment period .The main characteristic of Self help group is instead of one woman, the entire group is to negotiate with the bank .The SHG can then on-lend the money to its members, helping them to employ it in some incomegeneration activities. Presently there are about 800 MFIs and 22 lakh self-help groups (SHGs) that are the main sources of microfinance. The primary objective of a self-help group is to provide credit access to members of poor households on sustainable basis Characteristics of Self help group Mostly focus on women SHG is commonly an economically homogeneous group formed based upon the affinity of its members Poor people are able to access credit Encourage savings and thrift among poor people and achieve reasonable standard of life Avoid the dependence on moneylenders Helps to achieve empowerment of women

 Progressive lending Easy repayment terms . The concept of SHG is based on the following principles: Self-help supplemented with mutual help can be a powerful vehicle for the poor in their socioeconomic development; Participative financial services management is more responsive and efficient; Poor need not only credit support, but also savings and other services; Poor can save and are bankable and SHGs as clients, result in wider out reach, lower transaction cost and much lower risk costs for the banks; Creation of a common fund by contributing small savings on a regular basis; Flexible democratic system of working; Loaning is done mainly on trust with a bare documentation and without any security; Amounts loaned are small, frequent and for short duration; Defaults are rare mainly due to group pressure; and Periodic meetings non-traditional savings. Self-help groups as an instrument of Economic Empowerment Microfinance activities were developed to target the poor women and to set up empowerment activities. Initially, the empowerment of women was started for poverty alleviation. Empowerment is a process of change by which individuals and groups gain power and ability to take control their lives. It involves an increased well being, access to resources, increased self-confidence, self-esteem and respect, increased participation in decision making, bargaining power, control over increased benefits and resources and ones own life Not all activities that lead to an increase in well-being of a woman are necessarily empowering in themselves .It is difficult to say which factors are more important for empowering women. For SHG programs, the results seem to indicate that the minimalist microfinance approach is not sufficient. Additional services like training, awareness raising workshops and other activities over and above microfinance programs that merely focus on financial services are also an important determinant of the degree of its impact on the empowerment process of women (Ranjula Bali Swain and Fan Yang Wallentin, August 24, 2007) Empowerment is not essentially political alone; it is a process having personal, economic, social and political dimensions with personal empowerment being the core of the empowerment process. In fact political empowerment will not succeed in the absence of economic empowerment. The Scheme of Micro-financing through SHGs create empowerment promoting conditions for women to move from positions of marginalization within household decision making process and exclusion within community, to one of greater centrality, inclusion of voice. The Social processes of Micro financing programmes strengthens womens self esteem and self worth, instill a

greater sense of awareness of social and political issues leading to increased mobility and reduced traditional seclusion of women. Most importantly micro-finance programmes enable women to contribute to the household economy, increasing their intra-household bargaining power. Thus, micro financing through Self-help groups has transferred the real economic power in the hands of women and has considerably reduced their dependence on men. But the lack of education often comes in the way and many a times they had to seek help from their husbands or any other educated man/ woman for day-to-day work. The political as well as economic empowerment will not succeed in the absence of women education in skills and vocations they require the most. The Governments in developing countries therefore must take effective steps to enroll the members of SHGs in the Schemes of open schooling or any other distance mode to impart education. Although it is also true that economic empowerment alone does not always lead to reversal in gender relationship A majority of microfinance programs target women with the explicit goal of empowering them. However, their underlying premises are different. Some argue that women are amongst the poorest and the most vulnerable of the underprivileged. Others believe that investing in womens capabilities empowers them to make choices, which is valuable in itself, and also contributes to greater economic growth and development. Another motivation is the evidence from literature that shows that an increase in womans resources result in higher well-being of the family, especially children. Finally, an increasing number of microfinance institutions prefer women members as they believe that they are better and more reliable borrowers thereby contributing to their financial viability. . The United Nations has declared the year 2005 to be the Year of Micro credit ROLE OF NABARD ON THE DEVELOPMENT OF SHG SHG-Bank Linkage was initiated under the support of the National Bank for Agriculture and Rural Development [NABARD] in 1992 as a pilot project to assist micro finance institutions [MFIs]. This scheme has made remarkable progress in the present scenario. Various micro financial institutions such as commercial banks, Regional rural banks, NBFC and NGO are competing with each other in providing micro financial services to meet the needs of poor sections through SHG -Bank Linkage programme. More than ten years, the linkage programme not only finances SHGs through commercial banks, Regional Rural Banks (RRB) and cooperatives, but has also educated bankers to become SHG supporters. The most general model for linkage is where an NGO forms a group and a bank links to it directly. Training and capacity building is a vital module of NABARD's strategy. NABARD has been playing dominant role in this bank credit linkage programme up to March 2006 cumulatively it linked 22.38 lakh groups and disbursed loans of Rs. 11,397.55 crore. Through this programme 24.25 million poor families are brought under the banking services.

The various Micro finance service providers include apex institutions like National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), and, Rashtriya Mahila Kosh (RMK). At the retail level, Commercial Banks, Regional Rural Banks, and, Cooperative banks provide micro finance services

Various kinds of SHG-Bank Linkage Models MODEL-I: SHGs formed and financed by Banks

MODEL-II: NGOs act as Facilitators, SHGs financed directly

MODEL-III: SHGs financed by Banks using NGOs as Financial Intermediaries

Importance of Micro finance through SHG Micro-finance interventions are accepted world over, an important strategy for concurrently addressing both poverty alleviation and womens empowerment The impact of micro-finance programme through SHGs has been brought drastic changes to the lives of the members , irrespective of the direct borrowers of the credit. In India significantly, in the rural perspective, the SHGs have helped the poor, especially the women to overcome the existing access ability of finance from formal credit institutions. Poor rural women considered SHG is an effective instrument to promote the income generation activities, social status, and confidence of group members. The scheme of micro financing through Self Help Groups (SHGs) has transferred the real economic power in the hands of women and has considerably reduced their dependence on men. This has helped in empowerment of women.

Effectiveness of Micro financing in Self Help Group Micro finance programmes are currently being promoted as a key strategy for simultaneously addressing both poverty alleviation and womens empowerment. Before 1990s, credit schemes for women were almost negligible. There were certain misconception about the poor people that they need loan at subsidized rates of interest on soft terms, they lack skills, capacity to save, credit worthiness and therefore are not bankable. Nevertheless, the experiences of several and SHGs reveal that rural poor are actually efficient managers of credit and finance. Availability of timely and adequate credit is essential for them in their enterprises rather than subsidies. Earlier government efforts through various poverty alleviation schemes for self-employment by providing credit and subsidy received little success. Since most of them were target based involving various government agencies and banks. The delivery of micro finance through Self Help Groups (SHGs) - Banks linkage is viable for women in rural area due to the following reasons The Banking hours are not suitable to the convenient of the rural people due to nature of work involved by them. This limit their access to banking Most of the rural people are not highly educated and their financial literacy level is low. Due to this banker is find it very difficult to handle this type of people In rural area women are find it very convenient to obtain finance through SHG rather than formal system of banking. Most of them are reluctant to deal with the bank officers The transaction cost for dealing small volume of large number of borrowers is high, which turn into main hindrance to financial institutions to reach out rural area.

The poor women rural borrower credit requirement is less but their withdrawals are too frequent.

The working group (RBI, 1996) has commented thus on the progress of SHGs in India: SHGs helped to generate and collect small thrift amounts from a cross section of people hitherto considered incapable of saving. The essential difference between thrift and savings was that while thrift was generated out of deferred consumption, the savings were generated out of surplus. SHGs have facilitated the rural poor in fulfilling their credit requirements, both for emergent consumption needs as well as for small production requirements. SHGs have been able to meet successfully the credit requirements of the rural poor as per their choice, unlike in the case of borrowing under other programs of formal credit institutions. The high recovery rates of the SHGs are in sharp contrast to the poor recovery performance of banks in respect of various activities under rural credit. Since credit/finance was seen as management of the participants own funds and enterprises, a feeling of ownership and responsibility was generated. The entire cycle of assessing need, disbursement, recovery, monitoring, and supervision shifted closer to the scene of action under SHGs, and therefore the transaction cost of the loans was relatively less. Progress of SHG Bank Linkage in India The progress of banks in linking SHG groups to the banking system was quite Phenomenal in the last few years. The banks financed 361,731 new SHGs in 2003-04, almost 30 percent of the cumulative 1,07,09 financed since 1992. Bank loans disbursed to SHGs during the year 2003-04 aggregated Rs. 1,855 crore, an increase of 82 percent, as compared to Rs.1, 022 crore during 2002-03. By March 2004, of the total SHGs credit linked, Andhra Pradesh accounted for 36 percent, Tamil Nadu 14 percent, Karnataka 10 percent and Uttar Pradesh 7 percent, together accounting for 67 percent of the total SHG credit-linked and 80 percent of the bank loans disbursed. In order to balance the uneven growth of the micro finance programme, NABARD has identified 13 states as priority states. Of the total number of SHGs linked to banks, 20 percent have been formed and financed by banks, 72 percent formed by government agencies other than banks and NGOs, but financed by banks and 8 percent financed by banks through NGO and other agencies as financial intermediaries.

The challenges of micro financing in SHG for empowerment of women

small size and large number of loans makes micro financing comparatively costlier and affect their sustainability in the long run Due to absence of collateral security high risk involved .MFIs cannot operate with reduced interest rate as of high operational expenses Multiple memberships by a single borrower in different groups may affect the growth and objectives of micro financing The books are not audited by the independent auditor to detect errors There is slow progress of capacity building programme on the part of government to improve the success of SHG

Need for capacity building Training programme for SHG Loans given without a capacity building process will not only prove unsuccessful in eradicating poverty, but also exploit women instead of empowering them. It is extremely important to embrace capacity building processes to bring in social justice and equality (Bijay Swain, 2009). Mostly in rural areas SHG members are less educated and lack of awareness about livelihood finance and Income generation activities. The sustainability of Self Help group depends upon continuous training to improve the performance and bargaining power.Training methods to be employed to train self help groups should be appropriate to needs of the people. The Various training methods can be employed are Lecture, Group discussion, Case Study, Role Play, Simulation, Games Capacity-building for Entrepreneurship: Challenges and new opportunities for improving skills at the bottom of the pyramid The key challenges for capacity-building of potential entrepreneurs from among women at the bottom of the pyramid are: limited mobility, double burden of household and enterprise; literacy; economic risks. These challenges are facing by poor women all over India and other countries in the region which are socio-economically similar Limited mobility occurs mainly because, traditionally, women are viewed as having responsibility for household and child care. This has prevented them from getting the education and exposure they need for other tasks that would have helped them grow in their work at the work place. Even when they are able to involve themselves in nonhousehold tasks their household responsibilities remain, imposing a double burden on them. This is a challenge to their growth as entrepreneurs which requires them to invest more of their in their enterprise to obtain higher returns. Some of these challenges exist for women who are not necessarily poor and these relate to patriarchal constraints and the expectation that women have to maintain primacy of household and children over their other tasks In the rural areas, women cannot always neatly organize their time because they are subject to risks and efficiency problems that throw schedules off gear. When they have to identify their priorities in such a situation, they will generally choose household tasks over enterprise tasks

The concept of entrepreneurship is, in itself, complex and more so far a tribal women living in a remote region. Illiteracy is an additional barrier in enterprise tasks. These tasks include stock keeping and accounting as well as nothing down market rates .other challenges for the illiterate include inability to enforce the right to be heard by public officials and getting services to which they are entitled because public officials and market players see illiteracy as a class issue and reinforce the barriers by their patronizing behavior towards the poor Economic risks are important challenges in areas where poor people live. These risks are associated with environmental and weather problems .infrastructure gaps, resource depletion, and decreasing land productivity. They also go into deep debt to money lenders who charge usurious rates of interest. Poor infrastructure reduces quality market access and increases the length of the value chain reducing the margins for poor. Although enterprises for the poor are supposed to reduce economic risks by providing a stable source of income, the enterprise-building process is very knowledge and skill intensive requiring women to invest much time and energy in the learning process. It also requires women to have determination to overcome patriarchal and social obstacles. Economic risks usually interfere in this resulting in their uneven involvement and attention in enterprise promotion Support for Capacity Building of Microfinance Institutions MFIs are also provided Capacity Building Support to expand their operations as well as to increase their efficiency.Social Change and Development (SCAD) is a Non Governmental Organization formed in Tirunelveli and Tuticorin districts 20 years ago and it is founded by Dr. S. Cletus Babu SCAD works in around 456 villages. It will focus on training its members on value-addition of farm produce. In the year 2005, The National Bank for Agriculture and Rural Development has sanctioned a grant of Rs.50,000 to Human Formation Organisation , under its Rural Entrepreneur Development Programme. R. Bharat Kumar, Assistant General Manager, NABARD, said the grant would be released in instalments to the HFO to impart skill training to 30 women, who were members of various self-help groups in the district. "Under the programme, the NGO will provide `escort service' to the women by helping them to establish financial linkages with banks, which are essential for the women to start commercial units on their own, after the successful completion of training in embroidery and hand stitching," (Bharat Kumar,2005) The Chairman of SCAD Group of Institutions, S. Cletus Babu, said that SCAD was concentrating on conducting advanced training programmes for SHGs on valueaddition. "This would give them an edge over others and fetch attractive prices for their produce in the highly competitive market, controlled by corporate giants." Small Industries Development Bank of India (SIDBI) has also been regularly sponsoring staff of MFIs, training programmes in various areas of micro finance. A number of customized training programmes / workshops on specific areas of micro

finance being conducted by reputed training institutions / technical service providers for the field and managerial staff of MFIs are also supported from time to time. Sound practices in the area of human resource are important for the growth of the micro finance sector. SaDhan has planned capacity building interventions through skilled and trained Human Resource for the Microfinance Industry. A Training sponsorship Fund set up to promote smaller organizations in the microfinance sector who lack funds for capacity building of staff .The various activities of capacity building programme are Micro finance Education programme (MEP), Regional Micro finance Education programme (RMEP), Livelihood Education programme (LEP), Training of Trainers Programme (TOT) etc. The programmes focuses perspective building, skill building, financial management, MIS, delinquency management etc Micro finance in India Microfinance is an innovative powerful strategy for providing financial services to the poor and women In India micro finance programs are targeted through SHGs to reach out poor and disadvantaged groups .Sustainability is the biggest challenge for most of MFIs Sustainability is affected by operational costs, poor loan portfolio quality, inefficient lending systems and procedures, and excessive donor reporting requirements .Commercial banks are finding it very difficult to reach poor people due to high transaction costs associated with small loan amounts, highly segmented financial markets, and the provision of credit services to poor income group people, who are not providing any collateral security Table-1 Size of the SHG Microfinance sector in India Total Rural Credit of Cumulative credit schedule commercial Disbursed through Banks(Rs.crores) SHGS Percentage of credit through SHG

Year

2001 54,431 481 0.88 2002 66,682 1026 1.54 2003 77,153 2049 2.66 2004 85,021 3904 4.59 2005 109,976 6896 6.27 2006 1,75,816 11398 6.48 Source: RBI, Basic Statistical Returns, 2001-05 and Quarterly statistics on Deposits and credit of scheduled commercial Banks: March 2006 The growth of micro finance through SHG can be witnessed from the above Table Microfinance Institutions (MFIS) Micro-finance institutions are very varied and the sector is currently enduring a period of fast development and providing services to poverty reduction and womens empowerment. Micro finance sector is currently undergoing a period of rapid innovation. While many of these innovations can intuitively be expected to increase the contribution of micro-finance to poverty reduction, empowerment and other

developmental goals.At present, Microfinance Institutions (MFIs) play a significant role in the economic development of poor group of people. It provides financial services and facilities to the poor in rural, semi-urban or urban areas for enabling them to increase their income level and develop standard of living. MFIs generally consist of non-governmental organizations (NGOs), credit unions, non-bank financial intermediaries, and even a few commercial banks. Though microfinance services have witnessed tremendous growth, still it is not able to reach out to all the segments of the poor section The critical challenge faced by the micro financial institution is high transaction cost which makes interest on micro finance loan is comparatively high between 12% to 24% costlier. It cannot be assumed that microfinance institutions will necessarily be able to provide better services than those already available and/or fulfill the diversity of needs which poor people have. The high cost of supervision and small volume of large number of loans makes Servicing cost per client high. . It is crucial to ensure that externally-supported microfinance interventions integrate with and complement existing arrangements rather than displacing or undermining them. There may be ways of stimulating and supporting informal sector microfinance provision working with informal sector providers to increase their access to capital, increasing efficiency and developing networks in order to decrease interest rates and/or improve the services they provide It is high time for MFIS to formulate new strategies to reduce the cost of financing. Microfinance organizations should provide livelihoods finance through its innovative strategy to reach out poor . Analysis on Sources of funding to Micro finance Institutional Cooperatives 4.6 10.4 20.1 28.6 18.6 Non-Institutional Friends Money Others lenders 14.4 5.8 13.8 9 6.7 68.6 60.9 36.9 16.9 15.7 8.2 16 20.1 12.9 24.3

Year 1951 1961 1971 1981 1991

Banks 1.1 0.3 2.4 28.6 29

Govt 3.1 6.6 6.7 4 5.7

Total Instnl. 8.8 17.3 29.2 61.2 53.3

. Source: All India Rural Credit Survey and All India Debt and Investment surveys (AIDIS) Includes non-institutional sources other than friends and relatives and money lenders, e.g., traders, agriculturist moneylender, landlord, etc

The Self Help Group Movement in Tamil Nadu The first SHGs in Tamil Nadu were created successfully in 1989 in Dharmapuri district through the International fund for Agricultural Development (IFAD).In 1991,the scheme was extended to all the remaining parts of Tamil Nadu.The amount assigned for the creation of the SHGs was Rs.84.26 cr through IFAD.In 1996, the activities of SHGs were accepted as a policy matter by the government of Tamil Nadu and later from 2001,this idea of SHG has been growing and expanding at a very fast rate (V.Rmanathan,S.Rajmohan,marketing mastermind,April,2008) In Tamil Nadu the major political parties DMK and AIADMK have contributed maximum funds and avenues to the growth of SHG movement in Tamil Nadu The total loan disbursed by commercial banks through the self help groups (SHGs) in Tamil Nadu increased Rs 1,302.41 crore in 2007-08 from Rs 1,098.44 crore.Of this, India's largest public sector bank, State Bank of India (SBI) disbursed over Rs 750 crore to 6 million people through 124,000 SHGs in the state. For the current year, the bank has proposed to disburse over Rs 500 crore. Nabard sanctioned Rs 1 crore for capacity building programme during 2007-08. As part of its bank-linkage programme, it has covered over 3 million SHGs covering more than 50 million people in the country. The SHG Movement in Tamil Nadu has achieved tremendous success.However; the coverage among rural women is only 64%. It is imperative to ensure that the benefits reach the poorest and most vulnerable sections of the society. Though substantial credit linkage has been achieved in the SHG movement the saving - credit ratio is only around 1:1.5 and nowhere near the norms specified by NABARD (1:4). The credit flow per SHG family on the average has been only Rs.3875/-. The SHGs are mostly undertaking small and traditional economic activities. Many SHGs which are functioning as thrift and credit institutions need to be transformed in to viable micro-enterprises. Marketing is a big constraint for SHG products

Tamil Nadus Rural Population Particulars Male Female Rural Population 1,75,31,494 1,73,90,187 Literates 1,18,35,689 84,83,809 Source: Census of India, 2001 Total 3,49,21,681 2,03,19,498

From the above table it can be revealed that, more number of male are literate than number of female

Basic data on SHGs in Tamil Nadu(2005-2006) Rural 1,26,404 21,46,856 316.76 Urban 35,735 6,03,518 78.18 Total 1,62,139 27,50,374 394.94

Number of SHG Members Number of SHG Members Funds Generated by SHGs (Rs. Cr)

Source: Tamil Nadu Womens Development Corporation Tuticorin district empowers women In Tuticorin district the government takes all initiatives to empower the women this was endorsed through news published in the The Hindu on Sep 12, 2006. It is understood that the Tamil Nadu Corporation for Development of Women Limited (TNCDWL) would extend `credit-linked revolving fund subsidy' to the women selfhelp groups functioning in the municipal and town panchayat limits in the district from this fiscal. Previously, the corporation was offering the subsidy only to the women SHGs from village panchayats, under various schemes like Swarnajayanthi Grama Swarozgar Yojana. Project Officer M. Madasamy, , TNCDWL, stated that Now the Tamil nadu Government would offer the subsidy grant at the rate of Rs.10,000 to each group, with the remaining Rs.30,000 to come in the form of credit from financial institutions And this could be utilized for internal lending and micro-credit. Since Rs.10, 000 was considered as subsidy grant, banks would charge interest only on the credit component. Overall 1,453 women SHGs functioning in the 19 town panchayats and 1,831 groups in the three municipalities had been selected for the scheme. The subsidy would be disbursed only to those groups that fulfill the Tamil Nadu Government criteria of grading such as internal lending, audit of accounts, thrift, refund of credit and maintenance of records, pertaining to each group .Those groups which score 60 per cent would be chosen as beneficiaries. The successful group could apply to the banks for the release of the subsidy to them through TNCDWL According to Myrdal (1971) in a democratic society, the basic objectives of rural development are (i) raising community solidarity, (ii) raising agricultural needs and (iii) institutionalization of equality and part and parcel of rural development efforts. Importance of Banking services in rural area

In India majority of the people living in rural are lacks financial literacy and they are not able to access formal banking system. Generally banking sector prefers large accounts which give more profit and less transaction cost. In India majority of the villages do not have formal banking facilities to serve the needs of poor customers due to high transaction and servicing cost per client.Now they realized the importance of offering institutional credit to the rural poor and thus releasing them from the clutches of the money lenders and reaching untapped potential rural market. The bank has come up with cost-effective model to reach out rural un-banked area such as Business facilitator and Business correspondent model. Through this model they can offer financial services to the door step of poor rural people at less cost and helps to pumping funds without starting banking branches in rural area. Business Lines Bureau stated that Under RBI recommendations, the business facilitator will provide nonfinancial services and the business correspondent will provide financial support services to rural and farm sectors. Mr.R.Balakrishnan, Executive Director of Nabard, said that information communication technologies should be used to reach out to the poor.Business correspondent model can be successfully implemented through Self Help Group Reason for poor banking access to poor people in rural area Supply Side: 1. Large number of small volume of transaction makes appraisal, documentation, disbursement cost per client costlier 2. The absence of collateral security on loan increase the risk of the bank 3. The servicing cost per client is high 4. There is unviable business in the rural area. Demand Side: 1. The marginalized farmers need small amount of frequent credit. 2. The need for loan is mostly immediate requirement. 3. The purpose of loan obtained in rural areas through micro finance is only for consumption. 4. Mostly in rural area loan raised through micro finance is only for consumption purpose rather than income generation activities

Regulatory and Legal Environment of Micro finance in India .In the past decade, the Government of India has taken so much initiative to increase the access of financial services to the poor who are so far difficulty of close to formal banking system The government of India has established in the year 1992 National Bank for Agriculture and Rural Development (NABARD) with 500 self-help groups (SHGs to set targets for the Self-Help Group (SHG)Bank linkage program;

Initially the Reserve Bank of India (RBI), main concern was lending to SHGs; and exempt non-profit companies participating in microfinance from registering as a NonBanking Financial Company (NBFC). NABARD encourages banks to lend to SHGs by providing subsidized refinancing support and has established a goal to assist in promoting 1 million SHGs by 2008. But the trend has been changed after period of time, The RBI requires all Commercial Banks, Regional Rural Banks (RRB) and cooperatives to allocate 40% of their total advances to the priority sector (agriculture, small and micro-enterprises, housing loans and microfinance loans). . In India micro finance sector lacks conducive environment due to lack of regulation and MFIs not registered as cooperatives or NBFCs are almost completely unregulated and have nominal reporting requirements. Starting in 1998, the RBI has become increasingly active in the support of microfinance. The RBI has tightened deposit taking activities and MFIs are currently not allowed to take deposits or offer savings services. The RBI has set up a special cell for microfinance to advise the RBI on a promotional and regulatory framework. Furthermore, NABARD has initiated steps towards ensuring that approximately 200 MFIs in India are rated by a rating agency. Regulation on Micro financial Institutions An Increasing number of microfinance institutions (MFIs) are demanding of non-banking finance company (NBFC) status from RBI to increase their exposure to micro credit. Besides, MFIs and NGOs are searching wide sources of funds such as raising funds through equity investments, debt funds, external commercial borrowings (ECB) venture capital funds, grants and contributions. Nearly 10 MFIS such as Biswa in the East, Grameen Kuta in Bangalore, and Bandhan in West Bengal have received fresh licenses from the central bank. Some of the new institutions like Ujivan in Bangalore and Opportunity International in Chennai have also been granted approvals An NGO and an MFI could operate in the form NBFC under RBI norms or trust, registered under the Commissioner of Trusts and Charity or a Section 25 company, registered with the Registrar of companies One important condition of MFI is, it cannot lend more than Rs 50,000 to a single borrower/group of borrowers and restricted to access to public deposits. Mathew Titus, Sadhan's executive director, stated that, "Banks find it difficult to lend to MFIs in the absence of sufficient collateral. Hence, they ask MFIs to widen their capital base, which is possible only by transforming themselves into NBFCs.

 In order to reduce costs per borrower ,it is necessary that MFIs should scale up their operation and increase their capital base The central bank has tightened the rope on banks lending to NBFC in its latest set of guidelines A single NBFC cannot exceed 10% of the banks capital funds as per the recent guidelines Estimating the Annual Microfinance Demand in India The demand for micro-finance is enormous. According to the Tenth Plan document, in 1999-2000, 26.10 per cent of the population was living below the poverty line.: Inverting the Pyramid report shows that, Assuming the entire poor population of India is potential microfinance clientele, the market size for microfinance in India is in the range of 58 to 77 million clients. This translates to an annual credit demand of USD5.7 to 19.1 billion (INR 230 to 773 billion) assuming loan sizes between USD100 and 250. ICICI report states that, in 2003 it was estimated that the demand for credit in India ranges from US$3 - $9 billion annually, the organized sector is able to provide only US$200 million to US$300 million. The Small Industries Development Bank of India (SIDBI) has been the largest lender to MFIs, while Friends of Womens World Banking India and the National Womens fund have also played a important role Supply side of MFI On the supply side, the banking sector comprising commercial banks, cooperative banks and regional rural banks (RRBs) caters primarily to the demand mentioned above. NABARD states that by end of March, 2005, 35,294 branches of 560 banks were involved in extending credit to SHG. These comprised 48 commercial banks, 316 cooperative banks and 196 RRBs. During 2004-05, these banks had disbursed Rs 2,994 crore to 5.39 lakh SHGs. Compared to the demand, this amount is indeed miniscule. Micro finance is emerging as profitable venture, and attracting many big players such as bankers, development investors, equity investors and even Reliance Performance of MFIS in India According to Manju Mery George, associate VP of Intellecap, In 2002 the market share of MFIs in small credit was 28%. That has grown to 47% in 2007. Out of about 800 to 1,000 MFIs in India of which Intellecap had included about 60 in its research. George states that The 60 MFIs that were identified are the main ones in India and constitute to about 90 to 95% of the total business in this segment, though, lately there are some trends, which also favour growth of MFIs in India. He further added Leading MFIs in India presently have an estimated 9.76 million clients, up from 0.76 million clients in 2003. This figure is estimated to touch the 50 million mark by 2012. While loan portfolio is pegged at about $769 million assets are pegged at $915 million dollars in 2007. For top 10 MFIs in India the return on equity is over 60% a year. So by 2012 around $6 billion would be required for capital in MFIs in India.

Basix chairman Vijay Mahajan states that India is the largest emerging market for MFIs and it has been growing at a fast pace. Basix has partnered with insurance companies such as ICICI Prudential and Aviva Life Insurance to design insurance products for rural customers SKS Microfinance, launched in 1998, is considered as one of the fastest growing microfinance organizations in the world, having provided over Rs 425 crore with an outstanding of Rs 170 crore in loans to 320,000 women clients in poor regions of India .SKS also offers interest-free loans to meet emergencies as well as life insurance to borrowers According to MFIs the opportunities ahead are promising. The industry is growing at the rate of 50% and so the future is very bright. Vishal Mehta of Delhi-based Lok Capital Group states that ,If the growth continues, India can reach the $2 billion mark within two years, which provides equity capital and support to Indian MFIs. Experts opined that a funding gap has already started arising as MFIs are expanding their customer base but are still unable to meet more than a fraction of todays potential borrowers. Deutsche Bank estimates the funding gap to be roughly around $250 billion globally. Emerging Role of MFIS in India As per economic Times report Microfinance business to touch $2 bn by 2009 Investments in microfinance have been on the rise due to the involvement of the capital market and private sector investors. The gigantic banks like Deutsche Bank, ICICI Bank and Citibank entering micro finance segment. In recent times new private sector banks such as ICICI Bank, UTI Bank and HDFC Bank have begun to actively seek exposure in the microfinance sector. Key innovations include a pilot scheme by ICICI Bank that uses MFIs or NGOs, traders or local brokers as intermediaries for loans to groups of small farmers According to a research recently conducted by Deutsche Bank, microfinance is fast emerging as a hot opportunity for global players with an estimated $20 billion to be invested globally and around $3 billion in India, by 2010. The volume of total microfinance loans globally rose from $4 billion in 2001 to around $25 billion in 2006. About 51% of the total borrowers belong to South Asia, says Raimar Dieckmann of Deutsche Bank in the report The research conducted by Hyderabad-based Intellecap, a strategic services firm in the international development sector, states that the growth of Micro Finance Institutions (MFIs) in India would be even faster than anywhere in the world in the years to come .According, to Vishal Mehta of Delhi-based Lok Capital Group Now every MFI wants to go for equity but most of the promoters are still not willing to adapt to the professionalism after the equity comes in, Intellecaps research also points out that lately there has been value creation in MFIs due to diversification and partnerships. Like there has also been an emergence of asset financing and supply chain financing in credit. MFIs are also venturing into alternate financial and non-financial services. Mahesh Dayani, business banking, HDFC Bank, states that Even banks have now started focusing on micro credit and we have customers who have borrowed a small sum as Rs 1 lakh for opening a garage. Despite this the gap is too large, and there is lot

of opportunities to be explored in this area. Experts opined that, presently there is a rare direct access to capital market by MFIs. The same is expected to grow in India apart from MFIs going for PE from foreign investors and going for mergers with other MFIs or financial institutions. Emerging role of Venture Capitalists and Private Equity in Micro financing Table: Recent equity investments in Indian microfinance MFI SKS Microfinance SHARE Micro Spandana fin Investment Date March 2007 May 2007 July 2007 Investment Size USD11.5 Mln Investor USD27.5 Mln USD12 Mln Sequoia Capital, Legatum, Unitus Equity Fund, AavishkaarVinod Khosla, Ravi Goodwell Reddy, Odyssey Capital

Grameen Koota April 2008 USD2.3 Mln

J M Financial India, AavishkaarLok Capital Goodwell

Compiled by Intellecap ICICI Bank plays very important role in encouraging venture capitalists to access the sector. Many venture capital funds in the country have the potential of identifying and mentoring entrepreneurs. The three major venture capitalist such as Lok Capital, Aavishkar and Bell Weather have contributed to the growth of micro finance sector

Bell Weather has made three equity commitments for start up, and its committee has decided to increase the size of the fund from US$10 million, to US$25 million. Lok capital mobilizes and directs private capital to fund microfinance activities and to fund long term management and technical support for development of commercially sustainable MFIs. Aavishkar granted micro-equity funding (Rs. 10 lacs to Rs. 50 lacs, approximately US$20,000 to US$100,000) and operational and strategic aid to commercially viable companies in rising income or in offering goods and services to rural or semi-urban India. Indias leading microfinance institution SHARE Micro fin Ltd will receive equity finance and support from Aavishkaar Goodwell. He will invest US$ 2 Million for a minority interest in SHARE Micro fin Ltd., and its India based team of microfinance experts will work closely with SHAREs management to help SHARE reach an additional 5 million customers over the next 5 years.

ICICI Bank has come to a concurrence with these three venture capitalists under which it will give take-out financing to the MFI to acquire the venture after a period of three to five years, provided the MFI achieve an operational sustainability rating from Micro-Credit Ratings International Ltd (M-CRIL) and Credit Rating Information Services of India Limited (CRISIL). (Annie Duflo, October 2005) On the basis of Forbes Magazine 2008 survey Madura Micro Finance Limited (MMFL) has been rated as No.1 among the Top 50 Micro financial Institutions, for Operational Efficiency. MMFL has its head office in Chennai, TamilNadu, and is focused on bringing large infusions of productive capital to the rural poor in South India through carefully selected and trained women's self-help groups (SHGs). MMFL offers some of the lowest interest rates in the country . Mr.M.Narayanan, MMFL CEO opined that, UEFs capital infusion will go a long way in supporting our continued commitment to deliver efficient, high-quality services to our rural customers, enhance the depth of our product offerings and fuel our growth." Private equity fund JM Financial India has invested about Rs 400 million in Hyderabad-based micro finance company Spandana.Citibank and SKS Microfinance Pvt Ltd have created a partnership to begin a Rs 180-crore programme to provide micro credit in rural areas Emerging Role of ICICI Banks in empowering Poor in India: In India traditionally micro financing was conducted as one of a charitable activity generally by non-profit organizations and part from the mainstream financial system. Despite the fact that, this trend has been changing in India in the last few years, as many commercial banks have been broadly entering the sector. Padmaja Reddy, the CEO of Spandana states that, as a result of banks entering the game, the sector has changed speedily. "There is no lack of funds today, as banks are entering into MFIs favorably, not like a few years ago", further he added that more number of banks

entering the sector, interest rates have also dropped. "Interest rates have come down from 14% to 10%", ICICI is the largest private bank in India leading in this segment. It has realized profitable opportunity to make profits in untapped markets .ICICI's microfinance portfolio has been increasing at a remarkable rate. From 10,000 microfinance clients in 2001, ICICI Bank is now lending to 1.2 million clients along with its partner microfinance institutions, and its outstanding portfolio has improved from Rs. 0.20 billion (US$4.5 million) to Rs. 9.98 billion (US$227 million). ICICI Bank has been able to achieve rapid growth and success within a short period of time due to a series of inventive models and ideas. Partnership Model of ICICI Bank To address these limitations, ICICI Bank instigated a partnership model in 2002 in which the MFI acts as a collection agent, in that it combines debt as mezzanine finance to the MFI. The loans are contracted directly between the bank and the borrower, so that the risk for the MFI is separated from the risk inherent in the portfolio. This model has a guaranteed source of funds for increasing and extending credit. ICICI chose this model because it expands the retail operations of the bank by leveraging relative advantages of MFIs, as avoiding costs associated with entering the market directly. Partner ship model of ICICI Bank through Securitization One more way to enter into partnership with MFIs is to securitize microfinance portfolios. In the year 2004, the largest ever securitization deal in microfinance was signed between ICICI Bank and SHARE Micro fin Ltd, a big MFI operating in rural areas of the state of Andra Pradesh. ICICI acquired a part of SHARE's microfinance portfolio against a consideration calculated by computing the Net Present Value of receivables amounting to Rs. 215 million (US$4.9 million) at an approved discount rate. one more securitization deal was also signed with Bhartya Samruddhi Finance Limited (BSFL), in which ICICI Bank securitized the receivables of a selected portfolio of microfinance loans by BSFL amounting to Rs 42.1 million (US$ 957,000). Under the partnership model and under the securitization deal, the bank offers organizations with financial support at a mezzanine level which facilitates them to provide credit protection in the microfinance portfolios to a realistic extent. Challenges of Micro financial Institutions The challenge faced by most of the micro financial institutions is sustainability due to high interest .Challenge of Manju Mery George, associate VP of Intellecap states that MFIs though have been criticized for charging high interest rates of anything between 25% and 40%. But MFIs maintain that the rates are still low compared to the ones

charged by private money lenders. Due to absence of collateral security, high risk is involved .MFIs cannot operate with reduced interest rate because of high operational expenses. Even though the banks themselves were not charging such high interest rates, the SHGs were being finally forced to pay such high interest rates in the name of administrative costs levied by intermediaries and the banks. Ironically, this was happening when the big business groups were getting loans from the banks at much lower interest rates,. Dr.Chandrapal said The first challenge relates to sustainability. It has been reported that the MFI model is comparatively costlier in terms of delivery of financial services due to high supervision cost and small volume of loans. In rural area most of the clients are illiterate; they find it difficult to follow procedures of loan. In addition, the RBI has fixed the interest rate on savings bank deposits and there is no scope for innovation by the banks in this regard. Similarly, on the credit side, banks take into account the savings made by the group and provide credit only up to a fixed multiple of the savings (generally four times).

In spite of various steps taken by banks and financial institutions they could not reach out to the poor successfully. The main reason for high transaction cost is high cost of delivering a number of small loans in a fragmented location.. The main difficulty of MFIs is to identify a borrower, appraising them, disbursing money and then collecting it back within twelve months in small installments. MFIs in developing countries are reported to have been charging to their clients interest rate normally ranging from 30% to 70% per annum on a reducing balance basis. However, it is experienced that the effective interest rates in case of some MFIs are definitely higher than these rates on account of direct & indirect impact of following. Commissions & fees charged by MFIs to their clients for providing specific services Compulsory deposits to be eligible to obtain a loan, Frequency of repayments of loans [weekly or monthly] & However, it is important to design the delivery of credit and savings products in a way that minimizes transaction costs for both the client and the MFI. Variables that influence the effective rate include: Nominal interest rate Method interest calculation: declining balance or flat rate. Service fee / upfront fee Compulsory savings. Payment of interest at the beginning of the loan (as a deduction of the amount of principal disbursed to the borrower) or over the term of the loan. Compulsory contribution to guarantee, insurance or group fund.

Payment frequency collections daily/ weekly/ monthly etc. Loan term. Loan amount.

FIVE KEY FACTORS TO FUTURE SUCCESS In these section five important aspects which possibly can be emphasiszed to hasten the success of micro credit in long run. These factors will effectively support and contribute to the working of micro credit. 1. Credit Awareness and Providing Information: Credit massive awareness among the poor, motivating to them and developing their confidence are more important. Their vulnerability to poverty makes them to feel neglected and loosing their confidence to give a way out of it. They should make aware of various alternatives of livelihood projects feasible in their locality and possible by turning their ideas and capabilities. Special camps, orientations should be conducted to make aware the public about micro credit, the procedure to access it, benefit of it. Some type of minor vocational training and education can be imparted as a pre-factor to promote micro credit. A complete information system should be developed including who are the people in urgent needs of it, which are the institution to finance it and intermediaries. Information regarding the problems, possibilities and success of micro credit at national and international level can help to provide incentives to the rest and promoting it. 2. Up scaling the Provision of Micro Finance: Up Scaling the provision of Micro Finance in India is essential for future success. The macro scenario of micro fianc sector in India has not shown much impact. The cumulative disbursement of bank loans to SHGs stood at Rs.18040.74 crore as on 2006-2007 with an average loan of Rs.3111.32 per SHG and Rs.1,766 per family (RBI,2007). If the credit disbursal is considered through non formal sectors, the share of micro credit will be below 1 percent. The average loan size is below Rs.2000, which is too little to alleviate poverty of the family. This warrants up scaling of micro credit in terms of aggregate as well as average size. How will it be done? Should formal banking sectors expand their operation too adequately in this or is it the non-formal sector. (Non-Governmental organizations, Micro finance Institutions) to care of? The later category has no fund raising capacity from the market rather it acts as intermediary of the donors, agency. Lack of access for Micro finance institutions to risk capital and restrictions on them in deposit mobilization have been cited as the major reasons that prevent the up scaling of operations of this sector. (Gibbons, 2002). If they will be allowed for the same, they can transform them into credit institution like non banking intermediaries. But the problem here regulating such institutions will be a difficult task. Without perfect control and regulation of the activities, the entire change can be proved as a wrong strategy for development. It is the banking sector to consider the expansion of their business in this direction, with the active intermediation of MFIs to have a positive development. Up scaling the provision of micro finance on the strength of its performance, measured primarily ion terms of the repayment rates and financial sustainability indicators of a handful of MEIs and without a serious reconsideration of certain development strategy. Any effort at up scaling thus needs to be viewed with

caution as it could actually lead to increased failures and credit indiscipline in the field (Nair. 200 5). 3. Providing Necessary Infrastructure Capacity Building Measures: The success of micro credit also depends on the state of infrastructure and amenities existing in their locality. Provision of power, irrigation, all season connecting road, establishment of store houses, development of marketing societies, are very much essential for the success of micro credit. To include the habit of saving, access credit and repayment, branch of an y nationalized or co-operative bank should be set up in the big villages or in nearest locality. The poor are some tomes disconnected from market forces because they lack human capital, good nutrition, health and adequate education. These factors should be given proper attention for long term development of micro credit and to alleviate poverty. The role of local government is essentially important to take care of these factors. Non government organization also to some extent can contribute to this by help of different development and promotional activities. 4. Management of SHG: Formation of self help group and giving them credit only, will not help much to bring success and solve the problem of poverty. More important is the management of these groups. The role of MFIs or intermediaries is vital to see this. Formation of group of equally minded people constant motivation to them to continue the saving irrespective of their difficulties, selection of project on consensus of members and access credit are essential for starting up a self employed income generating enterprise. But the success of the unit depends on the strategy taken for production, marketing and efficiency shown by the unit members. MFIs, being external agency they should keep eye on the functioning of SHG and render necessary advice to inculcate the business ideas, capacity of the clients to sharpen and mould them for getting success. Internal discipline avoidance of misunderstanding, continuous monitoring, proper evaluation and learning from the same and timely suggestion to further improvement are essential to make micro credit success. MFIs role for this are significant which can help to bring success to micro credit financing. 5. Providing Supporting or Related Services: The poor does not only need credit, he also needs other financial services, focus on micro credit alone and leave out micro savings, micro-insurance and money transfer is myopic. (Mahajan, 2005). Micro credit is a means but it is not every thing to end poverty nor even is it sufficient alone to start micro enterprise. Other inputs and services are required such as identification of livelihood opportunities both in farm and non farm sectrors. However, greater diversion from agricultural and allied activities to others sometimes may create distortions and adversely affects agricultural sectors and economic growth. This should be rationally decided on the consideration of availability of resources and their suitability to the kinds of projects. Other services like- selection and motivation of micro entrepreneurs, providing background business, technical and marketing knowledge, exploring markets for inputs and outputs, basic knowledge of finance management and provision of micro insurance to cover the loss or damage of income generating assets or product produced with the help of micro credit and other are essential for the effective working of micro credit. The role of insurance is more

important to avoid the risk of closing down the project and non repayment of credit in future. Purchasing inputs from right market at proper rate and selling the outputs at right price gives incentive and profit to run the business in the long run. Besides the importance of development education, health services are highly acknowledged for the future prospects of micro credit and eradicating poverty. Without these services micro credit financing has limited scope, even it can lead to failure.Relative requirements of these factors vary from region to region depending on the state of development that it has realized The world over, micro-finance institutions are evaluated on the basis of five criteria:

Has there been a significant improvement in the living standards of the people targeted? Has there been the development of a sustainable micro-finance institution? How reasonable the rates of interest charged? Are any coercive methods used for recovery of loans? Is there an element of government subsidy involved?

Self Help group Bank linkage model is an innovative model to generate employment opportunities for the rural poor. The study focuses on the effectiveness of micro financing in Self Help Group in Southern Rural Areas of Tamil Nadu.It can be evaluated in terms of following: Analyzing financial behaviour of SHG beneficiers Saving Behaviour Loan consumption pattern Investment Behaviour Growth of Business Repayment of Loan The economic empowerment of women self help group Economic Independence Consciousness of their rights Independent source of Income Increased Assertiveness No dependence on money lender Meeting Husbands money requirement Not depending on Husbands income Improved Status at home Increased Outside Exposure Command over ones Own life Growth of Family Income Bargaining power Improved Decision making power

 Increased intelligence Self confidence Self-esteem The growth of SHG bank linkage programme in Tuiticorin , Thirunelveli and Madurai district shows that SHG act as an instrument to transform the lives of the poor women and empower them economically strong. Capacity building training to self-help group (SHG) members in turn help them to make use of micro finance facilities effectively for empowerment of women .The microfinance sector is growing rapidly in India, but challenges must be addressed in order to make this growth both effective and sustainable